US stocks were predominantly higher after mostly softer-than-expected US inflation - Newsquawk Asia-Pac Market Open

• US stocks were mostly higher and extended on gains seen on Monday as the largely cooler-than-expected US CPI provided an additional fillip to US equity futures, while sentiment continued to improve throughout the US afternoon with broad-based risk-on trade observed and nearly all US indices closed around today's highs including the S&P 500 which turned positive YTD although the Dow lagged amid losses across blue-chip pharmaceuticals following US President Trump's recent order to slash drug prices and with UnitedHealth shares plunging as its CEO steps down.
• USD gave back a sizeable portion of Monday's trade-inspired gains with the DXY back beneath the 101.00 level amid headwinds from the largely softer-than-expected US CPI data and with Real Weekly Earnings at a contraction, while there was also a lack of appeal for the dollar amid the broad heightened risk appetite.
• Looking ahead, highlights include South Korean Unemployment, Japanese PPI, Australian Wage Price Index, Supply from Australia.

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LOOKING AHEAD

• Highlights include South Korean Unemployment, Japanese PPI, Australian Wage Price Index, Supply from Australia.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks were mostly higher and extended on gains seen on Monday as the largely cooler-than-expected US CPI provided an additional fillip to US equity futures, while sentiment continued to improve throughout the US afternoon with broad-based risk-on trade observed and nearly all US indices closed around today's highs including the S&P 500 which turned positive YTD although the Dow lagged amid losses across blue-chip pharmaceuticals following US President Trump's recent order to slash drug prices and with UnitedHealth shares plunging as its CEO steps down.
• SPX +0.72% at 5,887, NDX +1.58% at 21,198, DJI -0.64% at 42,140, RUT +0.49% at 2,102.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said China has agreed to open up to the US for trade which China has to do, and we'll see what happens.
• US hopes to strike deals on minerals and chips during President Trump's Middle East trip, according to the Washington Post. US is negotiating AI chip exports to UAE’s G42 and Saudi Arabia’s new AI firm Humain, potentially in partnership with OpenAI. Furthermore, a separate USD 9bln Saudi-US minerals MoU was also signed, while the moves aim to counter China, but raise concerns about offshoring critical technology to authoritarian states.
• US reportedly weighs letting UAE buy in excess a million advanced Nvidia (NVDA) chips, according to Bloomberg.
• Saudi Arabia and Nvidia (NVDA) are to build AI factories to power the next wave of intelligence for the age of reasoning and to deploy 6k Blackwell GPUs.
• EU's Trade Commissioner Dombrovskis said US tariffs negatively affect the EU outlook for 2025 and new EU forecasts will be released on May 19th.
• German Chancellor Merz said he will speak with US President Trump in the near term, while he said they will push for a tariff reduction and simplification of tech standards.
• China criticised a trade deal between the UK and US that could be used to squeeze Chinese products out of British supply chains, according to FT.
• UK government said the trade remedies authority recommended that country-specific caps be imposed on certain categories of steel, while caps will come into effect from October 1st to allow steel importers time to adjust.

NOTABLE HEADLINES

• US President Trump said the market will go higher and it is amazing what a climbing market will do.
• US President Trump posted on Truth Social “No Inflation, and Prices of Gasoline, Energy, Groceries, and practically everything else, are DOWN!!! THE FED must lower the RATE, like Europe and China have done. What is wrong with Too Late Powell? Not fair to America, which is ready to blossom? Just let it all happen, it will be a beautiful thing!”
• NY Fed Survey showed student loans saw a ‘large uptick’ in transition into delinquency rate for Q1, while most other types of credit saw a steady transition into delinquency rates.
• WSJ article noted the April CPI data gives Federal Reserve officials little reason to change their wait-and-see stance as they are bracing for cost increases or distortions as tariffs take their full effect, while it added that if it weren’t for the broad increase in tariffs in April, the inflation numbers might have kept the Fed on track to resume lowering interest rates. Furthermore, it stated that potential cost increases in the months ahead are likely to keep the Fed frozen in place until officials can be confident businesses won’t continue to hike prices.

DATA RECAP

• US CPI MM SA (Apr) 0.2% vs. Exp. 0.3% (Prev. -0.1%)
• US CPI YY NSA (Apr) 2.3% vs. Exp. 2.4% (Prev. 2.4%)
• US Core CPI MM SA (Apr) 0.2% vs. Exp. 0.3% (Prev. 0.1%)
• US Core CPI YY NSA (Apr) 2.8% vs. Exp. 2.8% (Prev. 2.8%)
• US Real Weekly Earnings MM (Apr) -0.1% (Prev. 0.3%, Rev. 0.6%)
• US Cleveland Fed CPI (Apr) 0.3% (Prev. 0.3%)

FX

• USD gave back a sizeable portion of Monday's trade-inspired gains with the DXY back beneath the 101.00 level amid headwinds from the largely softer-than-expected US CPI data and with Real Weekly Earnings at a contraction, while there was also a lack of appeal for the dollar amid the broad heightened risk appetite.
• EUR benefited from the dollar's retreat and approached just shy of the 1.1200 handle, while there was little reaction to the latest ECB rhetoric and German ZEW metrics.
• GBP reclaimed the 1.3300 status owing to the weaker buck and amid outperformance in cyclical peers, while the currency was unfazed by weaker-than-expected jobs and earnings data.
• JPY strengthened against the dollar which saw USD/JPY retreat beneath the 148.00 territory although the Japanese currency was pressured against other major counterparts as the mostly positive risk appetite spurred haven outlflows.

FIXED INCOME

• T-notes declined amid the positive risk appetite and despite the soft US CPI data as the Fed is likely to remain patient.

COMMODITIES

• Oil prices extended on the gains seen on Monday with the energy complex seemingly buoyed by the broader sentiment as opposed to any specific headline driver.
• Saudi Aramco CEO said they are signing MOUs that will avail about 6.2mln tons of LNG and will be investing more to expand its LNG projects in the US with a target to reach 7.5mlm tonnes by 2030, while they will sign an agreement to spend USD 3.4bln into expanding refineries in the US.

GEOPOLITICAL

MIDDLE EAST

• Israel's military said it identified the launch of a missile towards Israeli territory from Yemen which was intercepted.
• US President Trump said the biggest destructive force in the Middle East is Iran and he wants to make a deal with Iran but added if Iran rejects olive branch, they have no choice but to inflict maximum pressure and would drive Iranian oil exports to zero. Trump added that the choice is Iran's to make and the Iran offer will not last forever.
• US President Trump said he wants to offer Iran a new and better path toward a more hopeful and brighter future, while he also stated they are ready to help Lebanon create a future of economic development and peace with neighbours.
• US issued new Iran-related sanctions which target one individual, several entities, and two vessels, while the US State Department said they are imposing fresh Iran-related sanctions on the shipping network which was sending millions of barrels of Iranian oil to China. Furthermore, the US Treasury said it is imposing sanctions to target the global network shipping Iranian oil and funding Iran's military and 'terrorist activities', while it is sanctioning nearly two dozen firms operating in multiple jurisdictions.
• Iran's foreign ministry spokesperson said recent US sanctions on Iran are not constructive when it comes to negotiations.
• US President Trump said he will order the cessation of sanctions against Syria and made the decision after discussions with Saudi’s Crown Prince and Turkish President Erdogan.

RUSSIA-UKRAINE

• US President Trump said they are working hard to end Russia-Ukraine bloodshed and talks could produce good results, while he added Secretary of State Rubio will go to the Russia-Ukraine talks.
• Ukrainian President Zelensky said he expects a possible ceasefire agreement as the "number one" result of talks in Turkey and stated that US President Trump was invited.
• Russian Deputy Foreign Minister Ryabkov said they are ready to negotiate responsibly but doubt Ukraine's capacity for discussions and Russia expects direct contact with Ukraine in Istanbul to take place.
• Russia's Kremlin said its delegation is preparing for talks in Turkey but declined to further comment on the proposal from Ukrainian President Zelensky for Russian President Putin to attend the talks.
• French President Macron said in the case of non-respect of a ceasefire in Ukraine, their desire is to impose new sanctions on Russia in the coming days which could involve financial services, oil and gas.

ASIA-PAC

NOTABLE HEADLINES

• China's market regulator said the Chinese government summoned JD.com, Meituan, Ele.me and other platform companies to discuss problems concerning competition in the food delivery industry, while it asked platform companies to follow laws and regulations, as well as strengthen internal management.

EU/UK

NOTABLE HEADLINES

• ECB's Knot said there is no alternative to the dollar in many of the functions it fulfils and dethroning the dollar is far away.
• ECB's Makhlouf said monetary policy responses will need careful calibration given the size, scale and a more persistent nature of fragmentation-induced shocks and their impact on prices.
• French Central Bank said the economy is set to grow "slightly" in Q2 after 0.1% growth in Q1 and sees the likelihood of another interest-rate cut by summer.

DATA RECAP

• UK Employment Change (Mar) 112k vs. Exp. 120k (Prev. 206k)
• UK ILO Unemployment Rate (Mar) 4.5% vs. Exp. 4.5% (Prev. 4.4%)
• UK Avg Earnings (Ex-Bonus) (Mar) 5.6% vs. Exp. 5.7% (Prev. 5.9%)
• UK Avg Wk Earnings 3M YY (Mar) 5.5% vs. Exp. 5.2% (Prev. 5.6%, Rev. 5.7%)
• German ZEW Economic Sentiment (May) 25.2 vs. Exp. 11.9 (Prev. -14.0)
• German ZEW Current Conditions (May) -82.0 vs. Exp. -77.0 (Prev. -81.2)
• EU ZEW Survey Expectations (May) 11.6 (Prev. -18.5)